Probability Weighted Moving Average

2022년 11월 2일

The Probability Weighted Moving Average uses a log-normal (continuous) distribution to calculate the probabilities of a range of lengths MAs to assess their performances, and respectively assign weights to a mean of this range. This assumes that the values of the MAs (call it A) aren't normally distributed, but instead log(A) is normally distributed, which can be a fair assumption. In P(t, t+X) where X is the number of trades assessed, it assumes the probability is not dependent on t and independent of previous price.

For P(t, t+X), the higher the value of X, the more trades are assessed.

Range of lengths comes in slow (default) or fast. Faster MAs are not preferable and should be limited to HTFs.

The color code can be either weighted (where lighter shades of blue suggests faster values have more weight, and darker shades suggest slower values have more weight) or coded for bull/bear: green when bullish, red when bearish.